A bond with a face value of Rs. 1,000 pays annual interest of Rs. 80 and currently sells for Rs. 800. What is its approximate current yield?
Correct answer: C. 10%
- A. 6%
- B. 8%
- C. 10%
- D. 12%
Explanation
Current yield is calculated as annual interest divided by the bond's current market price. Thus, Rs. 80 divided by Rs. 800 equals 10%; this is not the bond's yield to maturity.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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